Helping Faculty Understand the Budget

From Rachel Toor

As a regular faculty member, the area that is possibly more incomprehensible to me than intercollegiate athletics is university budgets. Fortunately, I have very smart friends who will explain things to me.

I reached out to one of the biggest higher ed geeks I know, EAB’s David Attis, for some expert advice. Here’s what he had to say.

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University budgets can be impenetrable. I’ve even met CFOs who couldn’t explain the finances of doctoral education. But if faculty want to play a serious role in shared governance, they need to put in the time to understand their own institutions. Shared governance does not work when only one side understands the financial model. Presidents who want productive governance can’t assume financial literacy will emerge on its own. It has to be built—deliberately.

Here are five common faculty misperceptions and what presidents must do about them:

1. A good enrollment year does not fix structural problems.
One strong cycle can mask long-term decline. Temporary gains do not reverse demographic contraction, rising discount rates, state funding volatility, or structural cost growth. Presidents must celebrate wins—but relentlessly frame the long-term revenue and expense drivers. Show multiyear enrollment and net tuition trends. Make volatility visible. Structural challenges do not disappear because of one favorable year.

2. High enrollment does not equal financial sustainability.
Large majors are not automatically profitable majors. High-enrollment programs often carry substantial instructional and support costs, and not all contribute meaningfully to shared overhead. Presidents should insist on transparency around contribution margins and cost structures, making clear that covering direct expenses is not enough. If low-enrolled programs face scrutiny, high-enrolled ones should, too. No program is exempt from financial reality.

3. Administrative growth is not automatically “bloat.”
Calls to cut administration are predictable—and sometimes warranted—but blanket assumptions ignore how modern universities operate. Administrative staff drive recruitment, student success, compliance, fundraising, and research support. Cut too deeply and faculty will feel it in lost grant support, weaker enrollment, and diminished services. Presidents must connect the dots: Show what these roles do, what they cost, and what happens if they disappear.

4. An open faculty line is not automatically the top priority.
Tenure-line hires are essential—but they are 30-year fixed commitments in an era of volatile revenue. Presidents must clarify the difference between one-time funds and recurring dollars and make explicit the trade-offs across departments, especially when shifting capacity toward growth areas. This is not about denying investment in faculty; it is about managing fixed costs responsibly in a variable environment.

5. Indirect cost recovery is not discretionary surplus.
When faculty secure grants with facilities and administrative recovery, it can be tempting to treat those dollars as available for redistribution. But ICR pays for utilities, compliance staff, space, and systems that make research possible. Presidents must explain clearly where those funds go and why treating them like flexible surplus creates political and reputational risk. ICR is not a slush fund—it is the cost of doing research at scale.

Presidents cannot afford to let financial misunderstandings fester. Institutions that navigate the next decade successfully will not be those that avoid hard conversations, but those where faculty understand the constraints, the trade-offs, and the long-term model—and where presidents make the economics impossible to ignore.

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Ed’s note: While David and I tend to be generous in our opinions about the presidents we work with, we know that sometimes there are real questions about the accuracy of the financial data itself, so it’s even more important that faculty understand the finances.

The writer is a current president.

A piece in The Sandbox highlighted the fiscal challenges we face across our sector.

One piece of the puzzle in addressing these challenges is the faculty’s role in shaping the structural changes necessary to sustain our institutions—and their frequent reluctance to adequately engage with our shared circumstances.

Consider what’s happened so far: At the New School, a faculty member responded to the institution’s voluntary separation plan by saying, “We feel like we’re being DOGE-ed.” At the University of Nebraska, the AAUP chapter responded to planned budget cuts by hiring a consultant who argued that the university was in good financial health. Then its Faculty Senate overwhelmingly passed a no-confidence vote against their chancellor. One colleague shared that their university had a committee conducting an academic portfolio review. Nothing changed, so they are trying again.

These reactions are both typical and inadequate. No one wants to hear the bad news that budgets have to be reduced. Faculty argue that they should be involved in budget-reduction decisions, but they often resist serious change.

Some of this resistance shows a lack of knowledge around what it costs to run a university. Some is around a sense of loss of academic identity. And some of it is just the real challenges of making change.

How can we engage the faculty around our serious fiscal realities? How can we make the hard decisions together?

My university, like many, faces reduced international enrollment as a result of federal immigration changes. This has created a disproportionate financial impact, as those students pay 2.5 times the tuition of domestic students. The result will be a structural deficit—if we don’t do something about it.

I sat down with two faculty leaders and said, “Look, here are the changes in federal policy that we know will impact our budget, and here are the proposed changes that will have budgetary implications. These come on top of other constraints.

“Our only choice is to make structural changes to the budget. That means reducing the size of the faculty and staff. We can no longer afford to keep academic programs that are underperforming. The question for you is, ‘How?’”

Those faculty leaders essentially said it’s too hard to tell our colleagues, “We like you as an individual, but your area isn’t as crucial moving forward.” They said it would be better to have a university committee deciding which academic programs to cut. They nominated the committee members, and we are off and running.

My provost and I have been on a college tour explaining the budget circumstances and that we are not going to spread the cuts thinly and evenly across all departments. In order to preserve the quality of our programs, we must decide what to let go of. That’s the charge the committee is undertaking. Right now there seems to be an appreciation, both for the imperative to change and that cuts will be unevenly distributed.

But, of course, there is also worry. Some are calling this committee the Death Squad. The expected criticisms are already emerging: Will units have access to raw data to interrogate it? (Yes.) Leadership and staff positions must be cut first (they are being cut more). We cannot be a university without this program (not every university has this program—must we?).

Every year I sit down with a faculty leadership group to transparently share our financial picture. “Here is how much new revenue came in.” “Here is how much mandatory costs have risen.” “Here is how much is left over to invest in institutional priorities.” We have built trust over the years.

Will they stand behind the decisions ahead? Will they accept limited transparency in order to protect the faculty members brave enough to serve and recommend program closures?

I genuinely don’t know, but it is the work that must be done to keep our university strong.

Helping Faculty Understand the Budget

The Sandbox

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